It’s a great idea to contribute to a Roth IRA for your child. It’s not a good idea to invent income in order to make the contribution, though.
financial aid
529 vs. Life Insurance
Over the past few weeks I have been asked (and pitched) the idea of whether cash-value life insurance makes sense as a vehicle for saving and paying for college. By cash-value life insurance, I am including whole life, variable life, universal life and variable universal life policies. First, in almost all cases, it does not. The very few cases where it may make sense will be covered shortly. Here are some reasons why a 529 college savings plan is better than cash-value life insurance. 529 plans have very high contribution amounts. Depending on your state, the total amount you can contribute to your 529 plan is very high, and the annual contribution amounts are high as well. From a federal tax perspective, you are allowed to contribute up to $14,000 annually without incurring gift tax consequences. This amount doubles to $28,000 annually if you’re married and elect to split the […]
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Student Loans Are Not Carte Blanche
For many college bound and current college students, the arrival of the financial aid reward can seem like winning the lottery. For some students, this sum of money is more than they’ve seen (in one sitting) in their entire lifetime. The temptation to think of it as a “paycheck” rather than what it is – a liability – can often lead students to make less-than-optimal decisions when it comes to allocating those borrowed dollars. When it comes to student debt it’s helpful to think of it as just that – debt. This is money that is supposed to go towards the costs of higher education. If and when you are in the position of getting your reward money, consider the consequences of using the money to finance unnecessary purchases. Remember, this is debt. It will have to be paid back someday and with interest. When you get your financial aid […]
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What to do with an extra 1,000 dollars
I occasionally get this question – especially around the time of tax refunds. When someone comes up with an extra $1,000, they often want to know how to best use that money wisely to help out their overall financial condition. Of course this question has different answers for different situations. I’ll run through several different sets of conditions that a person might find him or herself in, and some suggestions for how you might use an extra $1,000 to best improve your financial standing. (It’s important to note that you don’t have to have an extra $1,000 lying around to use this advice – you could have an extra ten or twenty or fifty bucks a week and put it to work with the same principles.) The point is to find money that isn’t being spent on something critical, and put it to work for you! Even small steps amount to wonders. […]
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Avoid the Freshman 15
It’s that time of year again when students either embark on a new journey from high school to college or return to undergrad studies from their freshman, sophomore, or junior summer into a new year of college. It’s also the time when bad habits, if left unmonitored, can result in what’s called the Freshman 15 – debt and weight gain. Historically, the Freshman 15 meant that a student settled down in college and in the first few months gained weight due to poor eating habits, stress, and perhaps alcohol consumption after turning 21. Today, I’ve expanded the Freshman 15 to also mean 15% – of credit card debt. Like consuming food, consuming money and on credit can lead to bad habits and have negative consequences. I can remember when I was a freshman in college and the credit card offers came pouring in. What an amazing display of copywriting! It […]
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APR vs. APY
Question: I am thinking on saving money in a 3 year CD paying .28%. The bank brochure is telling me I’ll get .28% APR, but there’s another word in the brochure that talks about APY. What’s the difference? Good question! APR (Annual Percentage Rate) is what you see on the “face” of the account. Example: If I invest $1,000 in a 1 year CD that pays 5%, the 5% on the brochure at the bank means APR. So I’m led to think that I’ll make 5% ($50) for the year for a total of $1,050. APY (Annual Percentage Yield) takes into account how often that interest rate is credited. Meaning does it credit a portion of that 5% monthly, semi-annually, or annually? If it’s annually, you’ll still get the 5% or $50. If it’s semi-annually, you’ll get credited 2.5% every 6 months. This is a bit better since you can […]
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Tips for Summer Jobs From the IRS
With summer in full swing, many young folks are working in temporary jobs for the summer. There are a few things that you need to know about these temporary jobs that the IRS (and I!) would like you to know. Recently the IRS produced their Summertime Tax Tip 2012-13, which provides important information for students working in summer jobs. I have added an extra couple of tips after the original IRS text that may be useful to you as well. The original text of the Tip is below: A Lesson from the IRS for Students Starting a Summer Job School’s out, but the IRS has another lesson for students who will be starting summer jobs. Summer jobs represent an opportunity for students to learn about the tax system. Not all of the money they earn will be included in their paychecks because their employer must withhold taxes. Here are six […]
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Tax Benefits for College
When faced with the high cost of college, you want to find and take advantage of every opportunity that you can to cut down on your out-of-pocket expenses, before you give in and take out loans. So after you’ve applied for all of the grants, scholarships, and other non-loan financial aid that you can, it’s time to consider what sorts of tax benefits may help out with your situation. Credits There are two different kinds of tax credits currently available in tax year 2010 and 2011: American Opportunity Credit – This credit is available for students (and parents of students) that are in their first four years in a degree program at college. The credit is a maximum of $2,500, and is calculated as: 100% of the first $2,000, and 25% of the next $2,000 of Qualified Higher Education Expenses (QHEE) paid for that student. QHEE is limited to tuition, […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.